Bengaluru-based digital wallet PhonePe had made waves in October 2017 when its parent Flipkart had announced a $500 million funding commitment to scale up its operations. This, incidentally, ranked among the largest single investment commitments in the Indian fintech payments space and was over and above the $75 million infused in the payments arm since its acquisition in 2015. The buzz is that yet another tranche of this promised amount has recently beefed up PhonePe's war chest amid intensifying competition in India's $200 billion digital payment market, expected to mushroom to $1 trillion in the next five years.
PhonePe, now a step-down subsidiary of US retailer Walmart, has received Rs 763 crore (approximately $111 million) from its parent entity in Singapore, The Business Standard reported. According to the company filings, PhonePe Singapore, previously known as Flipkart Payments, has infused the funds in the India entity by subscribing to 2,915,964 shares in the latter at Rs 2,450 apiece. This is the company's first fund infusion in 2019.
This fresh capital, coming on the heels of mega infusions in 2018 reportedly totalling Rs 3,280 crore from promoter entities, points to Walmart's larger goal of having a strong front in mobile payments in India. PhonePe, led by Sameer Nigam, has been looking to support user growth in a market heated up by the entry of deep-pocketed rivals like Google Pay and Amazon Pay, along with newer players like WhatsApp Payments, Reliance Jio and Xiaomi's Mi Pay. Then there is the market leader, Paytm, to contend with.
Experts told the daily that PhonePe is key to Walmart's e-commerce strategy in India. "Payment apps are both a proxy and a revenue driver for the key e-commerce players in India," said Vivek Durai, founder of Paper.vc, adding that players offering a seamless UPI-backed payment experience have seen a huge spurt in growth, including PhonePe and Google. "But Xiaomi's impending entry may encourage more FDI into India in the payments space in 2019. PhonePe's infusion is one such infusion," he added.
The new set of rules by the Department of Industrial Policy and Promotion, among other things, mandates the e-commerce marketplace to not influence the pricing of the goods sold on their platforms, which technically means throwing discounts out of the window. But as Durai points out, e-commerce companies are still allowed to incentivise buyers to make payments via their respective platforms, "like with scratch cards". Basically, given the inherent nature of the business, users quickly switch to services offering better discounts on transactions, and hence the growing focus on payments apps to attract users.
In the past year, PhonePe, for one, rapidly expanded its user base through discounts, promotional offers and deeper merchant integrations - at the cost of Paytm and Mobikwik. In FY18, the company's total expenditure reportedly stood at Rs 840 crore, of which Rs 701 crore was categorised under 'other expenditure', including discounts, cash-back offers, and marketing expense.
The move has paid off. Last December, the company announced that it had crossed a billion transactions on the PhonePe app within 26 months of its inception, "making it the fastest pace at which any Fintech-Payments company in India has achieved this milestone". In addition, it claims a 750,000-strong merchant base using its service.
Moreover, in February, Walmart India's 23 Best Price Modern Wholesale "B2B Cash & Carry" stores went live with PhonePe as a payment option. "With over one million Best Price members, mainly kiranas, now being introduced to digital payment options, this will accelerate the push to drive offline transaction traffic for the adoption of digital payments in India," PhonePe said in a blog post.
Edited by Sushmita Choudhury Agarwal